Nosipho Nomusa Dladla

Student number:42330726

Module Code: LML 4806

Assignment 01

Question 1

1.1The board will have a ground for removal in terms of Section 76(3)(a), S 76(3)(b)
and S76(3)(c) of the Companies act,2008, which requires a director to act:1

- in good faith and for a proper purpose;

- in the best interest of the company; and,

-director should act with a degree of care, skill, diligence that may reasonable be
expected of a person carrying out such functions and having the same skill and
experience of the director.2

This is a common law principle which has been partially codified in the Act. According
to the common law position the director has a fiduciary relationship with the company
to act in the best interest of the company and to act in good faith, this relationship
applies to all the directors of companies.3Section 76(4) of the act provides that a
director satisfies his or her duties if;

1 Companies Act 71 of 2018, s76(3)(a), (b) and (c).

2 Company Law ‘Only Study Guide for LML 4806’pg12.

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-he or she has taken reasonable diligent steps to become informed about a particular
matter,

-has no material financial interest in the subject matter; and has a rational basis for
believing and did believe that the decision he/she took was in the best interest of the
company. In section 76(4) states that a director should not be held liable for decisions
that led to undesirable result, where such decision was made in good faith.4

In order to determine whether Jimmy acted with the required care degree of care, skill
and diligence Jimmy will have to pass both objective and subjective test .In regards to
the objective test Jimmy will have to pass that the reasonable man test and the
subjective test Jimmy will have to pass whether he had the general knowledge, skill
and experience of the director ,in his case Jimmy has been with the company for 2
years performing the duties of a director. Therefore, it can be said that Jimmy breached
his duty of care and skill because he is an experienced director in his field.

In conclusion the directors may have a ground against Jimmy for his negligence and
his wilful misconduct and a breach of trust in regards to the performance of his
functions in the company as prescribed by Section 76(3)(a), S 76(3)(b) and S76(3)(c)
of the Companies Act 71of 2008.However,in regards to Jimmy’s fraud matter the
directors will have to bring the matter to court in order to obtain a delinquency order
against Jimmy in terms of S162(5).5

1.2The board of directors will have to give notice of meeting in the prescribed manner
and set the record date, including a copy of the proposed resolution and a statement
which will set out the reasons for the resolution with sufficient details that are clear and
specific to reasonable permit the director to prepare and present a response and a
reasonable opportunity to make a presentation, in person or through a representative,
to the meeting before the resolution is put to vote. According to S 71(6) of the Act it
provides that the removed director from the office by the company’s board of directors,
may apply to court within business days to review the board’s decision. Therefore, the

4 Farouk Cassim, Maleka Cassim, Rehana Cassim, Richard Jooste, Joanne Shev, Jacqueline Yeats,
The Law of Business Structures 1st ed (Juta 2012).
5 Companies Act 71 of 2018, s76.

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matter may be reviewed by the court upon application by the concern director within
20 business days of the removal from the office.6

Question 2

2.Section 86(1) of the Companies Act requires a public company or a state-owned

company to appoint a company secretary.7Section 86(3)(a)(b) further states that the
first company secretary of a public company or state-owned company may be
appointed.8

(a) the incorporators of the company; or

(b) within 40 days after the incorporation of the company, by either-

(i) the directors of the company; or

(ii) an ordinary resolution of the holders of the company ‘securities

Therefore, Corporates Services (Pty) Ltd will not be able to validly offer services of
secretarial to the Engineering Group Ltd because the act explicitly states that it’s
mandatory for public companies to appoint a secretary within 40 days after the
incorporation of the company. The secretary becomes an employee of the company
until the contract ceases or the secretary is removed by the board.

6 Companies Act 71 of 2018, s71(6).

7 Companies Act 71 of 2018, s86(1).
8 Companies Act 71 of 2018 s86(3)(a)(b).

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DECLARATION OF AUTHENTICITY

I, Nosipho Nomusa Dladla

Student number:42330726

declare that I am the author of this examination/assignment in LML

4806. I further declare that the entire examination/assignment is my
own, original work and that where I used other information and
resources, I did so in a responsible manner. I did not plagiarise in any
way, and I have referenced and acknowledged any legal resources
that I have consulted and used to complete this
examination/assignment. By signing this declaration. I acknowledge
that I am aware of what plagiarism is, and the consequences thereof.
Furthermore, I acknowledge that I am aware of UNISA’s policy on
plagiarism and understand that if there is evidence of plagiarism within
this document, UNISA may take the necessary action.

Date: 16/03/2023

Place: Centurion

Signature: Nosipho
(provide an electronic signature or type or write your name or surname
again)